Making Prudent Choices. Investing means making choices. For the investment officers at the Illinois State Treasurer’s Office, it means choosing investments that are risk-appropriate, high-performing, and meet or exceed the benchmark. It means making investments that not only strengthen the economic well-being of Illinois citizens and institutions, but making investments that reflect our commitment to sustainability, inclusion, and sound corporate governance.
Sustainability Factors. We at the Treasurer’s Office know that to fulfill our fiduciary duty and maximize returns, we need to focus on more than just short-term gains and traditional indicators. Additional risk and value-added factors that may have a material and relevant financial impact on the safety and performance of our investments need to be integrated into the decision-making process. These material sustainability factors include (1) environmental; (2) social capital; (3) human capital; (4) business model and innovation; and (5) leadership and governance factors.
Research agrees. Studies clearly demonstrate that companies with sustainable policies are lower risk investments and frequently provide collateral benefits to investors.1,2,3,4 So not only is sustainable investing good for the community, it’s good for business. To put it another way, sustainable investing aligns with our core fiduciary responsibilities.
That’s why we at the Treasurer’s Office are raising the bar. We endeavor to take governmental investment standards to a new level, one that recognizes that sustainable environmental, social, human capital, business model, and governance practices are strongly related to safer, more innovative, better-performing companies.
Why it matters. As a large, long-term investor to funds and corporations around the nation, we believe we can help raise the bar for the entire industry. That's why we're promoting an investment philosophy that fuses traditional investment objectives – optimal risk-adjusted returns, low expenses, and diversification – with a focus on sustainability, corporate responsibility, and risk management. By doing so, not only do we position ourselves to protect shareholder value and maximize returns, we can help foster a business culture that is more attentive to structural trends, societal impacts, and long-term growth. And that benefits all of us in Illinois and beyond.
1Fulton, Mark, Bruce Kahn, and Camilla Sharples. “Sustainable Investing: Establishing Long-Term Value and Performance.” Deutsche Bank Group. June 2012. Accessible at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2222740&rec=1&srcabs=2508281&alg=1&pos=2.
2Verheyden, Tim, Robert G. Eccles, and Andreas Feiner. "ESG for all? The Impact of ESG Screening on Return, Risk, and Diversification." Journal of Applied Corporate Finance, vol. 28, no. 2, 2016., pp. 47-55.
3Kotsantonis, Sakis, Chris Pinney, and George Serafeim. "ESG Integration in Investment Management: Myths and Realities." Journal of Applied Corporate Finance, vol. 28, no. 2, 2016., pp. 10-16.
4Eccles, Robert G., Ioannis Ioannou, and George Serafeim. "The Impact of Corporate Sustainability on Organizational Processes and Performance." Management Science, vol. 60, no. 11, 2014, pp. 2835-2857.